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Practical manual for Income Tax 2024. Part 1

Previous issue: small business concept

Regulations: Art. 101 LIS

In general

For the purposes of applying the tax benefits discussed in this section, small companies in the 2024 financial year are considered to be those in which the net amount of turnover in the immediately preceding tax period (2023 financial year) was less than 10 million euros, regardless of the net amount of turnover in the same financial year.

Special rules

  • When the company is newly created, the net amount of the turnover will refer to the first tax period in which the activity is actually carried out, increasing said figure proportionally to the year if the period of exercise has been less than 12 months.

  • If the immediately preceding tax period had a duration of less than a year, or the activity had been carried out over a period of time that was also shorter, the net amount of the turnover will be increased proportionally to the year.

  • Group of companies: In the event that a natural person, alone or jointly with his or her spouse or other natural persons related by direct or collateral ties, by blood or marriage, up to the second degree inclusive, is related to the entities of which they are partners in any of the cases referred to in article 42 of the Commercial Code, regardless of the residence of the entities and the obligation to prepare consolidated annual accounts, the net amount of the turnover shall refer to the set of entities or companies belonging to said group, taking into account the eliminations and additions that correspond by application of the accounting regulations.

  • In the event that the same natural person carries out several economic activities, the net amount of the turnover will refer to the set of all those carried out.

  • Entities under income allocation regime: The net amount of the turnover will be determined taking into account exclusively the set of economic activities carried out by said entities.

Temporal scope of application of tax incentives when the small company exceeds 10 million euros in turnover

Small companies that reach or exceed a turnover of 10 million euros in a tax period may, however, continue to apply the tax incentives of their special tax regime during the three tax periods immediately following that period, provided that they have met the conditions to be considered as small in that period (in which they reach or exceed the limit of 10 million) and in the two tax periods prior to that last period.

This measure also applies to the event in which said limit is exceeded as a result of a business restructuring under the tax regime established in Chapter VII of Title VII of the LIS , provided that the participating entities that have carried out such operation meet the conditions to be considered as small in size both in the tax period in which the operation is carried out and in the two tax periods prior to the latter.

Examples

  1. Mrs. VGC has been the owner of a company since 1996 with a net turnover of:

    • Exercise 2021: 3,700,000 euros.
    • Exercises 2022 and 2023: 8,300,000 euros.
    • Exercise 2024: 10,045,000 euros.

  2. Mr. JLT He is the owner of a company with a net turnover of 10,100,000 euros in 2023.

  3. Mr. SMG has been the owner since July 1, 2023, of a company whose net turnover as of December 31 of that year was 4,600,000 euros.

  4. Mrs. ABM has been the owner since September 30, 2024 of a company whose net turnover until December 31 of that year was 60,000 euros.

Determine the companies that will be considered small-sized companies in fiscal year 2024.

Solutions:

  1. The company described is small in size in 2024, as its net turnover in 2023 is less than €10 million. Furthermore, even though the turnover exceeded 10 million euros in 2024, the company will be able to continue applying the tax benefits of this special regime in 2025, 2026 and 2027, since both in 2023 and in the previous two years, 2022 and 2021, it met the net turnover limits to be considered small (less than 10 million euros in 2023, 2022 and 2021).

  2.  The company described is not small in size in 2024, regardless of its net turnover in that year.

  3. The company described is of small size in fiscal year 2024, since its net turnover in fiscal year 2023, raised to the annual figure, was €9,200,000, which does not exceed the established figure of €10 million.

  4. The company described is of small size in the 2024 financial year. It should also be noted that this tax classification will also apply in the 2025 financial year, because by increasing the net turnover to the annual figure, the resulting amount (240,000 euros) does not exceed the maximum amount of 10 million euros.

Note: the determination of the net amount of turnover is carried out in accordance with the comments made on this subject in this same Chapter.